TMI Tax Updates - e-Newsletter
October 18, 2012

Case Laws in this Newsletter:

Income Tax Customs Corporate Laws Service Tax Central Excise CST, VAT & Sales Tax Indian Laws

Articles

1. SCOPE OF CAPITAL GOODS FOR CENVAT CREDIT

   By: Dr. Sanjiv Agarwal

2. THE PRINCIPLES OF NATURAL JUSTICE ARE NOT CONFINED TO OPPORTUNITY OF HEARING ONLY BUT EXTEND TO EFFECTIVE HEARING

   By: DR.MARIAPPAN GOVINDARAJAN

3. UNLESS A SPECIFIC ORDER FOR FORFEITURE OF GRATUITY, EITHER IN PART OR AS A WHOLE, HAS BEEN PASSED BY THE EMPLOYER, THE EMPLOYEE IS ENTITLED TO RECEIVE GRATUITY

   By: DR.MARIAPPAN GOVINDARAJAN

4. Works contract service after negative list-Part 1

   By: AMIT BAJAJ ADVOCATE

News

1. Anand Sharma Asks EU to Declare India Data Secure

2. Auction for Sale of Government Stocks

3. Change in Tariff Value of RBD Palmolein, Brass Scrap (All Grades) Poppy Seeds, Gold and Silver Notified

Notifications

Companies Law

1. F. No. 1/5/2001-CL-V - dated 15-10-2012 - Co. Law

Amendment in National Advisory Committee on Accounting Standrads Constitution

Customs

2. F.No.354/22/ 2010-TRU (Pt.1) - dated 16-10-2012 - ADD

Corrigendum Notification No. 12/2012 –Customs (ADD) - Anti-dumping duty on import of Coumarin, originating in, or exported from, the People’s Republic of China.

3. 94/2012 - dated 15-10-2012 - Cus (NT)

Amends Notification No. 36/2001-Customs (N.T.), dated the 3rd August, 2001 - Palm oil, Palmolein, Soyabean Oil (Crude) and Brass Scrap (all grades) - Traiff Values

4. F.No. 437/49/2012-Cus. IV - dated 12-10-2012 - Cus (NT)

Appointment of Common Adjudicating Authority - M/s Bodal Chemicals Ltd., Ahmedabad & others, Ahmedabad.

5. F.No. 437/58/2012-Cus. IV - dated 11-10-2012 - Cus (NT)

Appointment of Common Adjudicating Authority - M/s Akhil Bhartya Samajotthan Sansthan (ABSS) Gunegamau, post Harimau, Tesil Musafirkhana, Sultanpur, Lucknow, U.P

DGFT

6. 23 (RE-2012)/2009-2014 - dated 16-10-2012 - FTP

Amendments in Policy Condition No. 1 under Chapter 93 in Schedule 1 - Import Policy of ITC(HS)-2012 - Import of arms (including parts thereof) & ammunition is permitted freely to the following sports persons/sports bodies.

Circulars / Instructions / Orders

DGFT

1. 23 (RE-2012)/2009-2014 - dated 15-10-2012

Trade in Border Haats across the border at Meghalaya between Bangladesh and India.

Companies Law

2. 32/2012 - dated 15-10-2012

Constitution of Committee for Reforming the Regulatory Environment for doing Business in India.

Highlights / Catch Notes

Income Tax

• Labor Payments Not Automatically Illegal Under Income Tax Act Unless Payment Itself Violates Law.

  Case-Laws - AT : Labour Charges - Violation of any law as long as the payment does not become illegal on account of such violation the same cannot be hit under the Income Tax Act - AT
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• Section 194H Not Applicable: Payments to Accredited Ad Agencies Not Considered Commission Under Income Tax Act.

  Case-Laws - AT : TDS - Payment by the assessee to accredited advertising agencies could not be terms as payment of commission and, therefore, the provisions of section 194H were not applicable - AT
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• Assessee Denied Deduction u/s 80IB: SSI Benefit Not Met Due to Plant and Machinery Value Exceeding 3 Crore Limit.

  Case-Laws - AT : SSI Benefit - value of plant and machinery - limit of 3 crore - Since the assessee did not comply with the conditions of the Proviso to clause (iii) of subsection 2 of section 80IB, it is not eligible for claiming deduction u/s 80B of the Act - AT
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• Development Costs of Discontinued Business Not Claimable as Revenue Expenditure for New Real Estate Ventures.

  Case-Laws - AT : As the business in respect of which the said development cost has been incurred is discontinued, the same cannot be claimed as revenue expenditure in respect of another business being real estate business, just because the land has been converted into stock in trade for the present busines - AT
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• Inter-office Commission Deduction Denied: Rule of Mutuality Blocks Assessee's Claim for Payments to Head Office and Overseas Branches.

  Case-Laws - AT : Disallowance of inter office commission paid/payable by the assessee to head office and other overseas branches - the rule of mutuality applies and the assessee cannot be allowed any deduction in this regard. - AT
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• Court Rules No Penalty u/s 271D for Amounts Received from Sister Concern; Section 269SS Provisions Not Applicable.

  Case-Laws - HC : Penalty u/s 271D - whether provisions of section 269SS are attracted to the amounts received from sister concern - no penalty - HC
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• Court Rules Software Expenses as Revenue, Not Capital Expenditure, Impacting Taxable Income and Financial Statements.

  Case-Laws - AT : Expenditure on account of software held as Revenue in nature. - AT
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• Customs Duty for Debonding Treated as Capital Expenditure, Increases Asset Value for Tax Calculations.

  Case-Laws - AT : Capital or revenue expenditure - payment of custom duty for de bonding increases value of the asset and it is required to be added to the costs or written down value - AT
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• Section 11 of Income-tax Act: Income Need Not Be Used for Charitable Purposes in the Year It Arises.

  Case-Laws - AT : There are no words of limitation in section 11 of the Income-tax Act requiring that the income should have been applied for charitable or religious purposes only in the year in which the income has arisen - AT
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• Directors' Appeals Dismissed by Commissioner Due to Absence of Section 179 Order; Right to Appeal Upheld.

  Case-Laws - AT : Aggrieved party - right to appeal - CIT(A) dismissed the appeals by the directors as 'not maintainable - no order u/s 179 of the Act has been passed. - appeals not maintainable - AT
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• High Court Rules Section 158 BC Notices Valid; Section 292B Does Not Apply to Income Tax Act Notices.

  Case-Laws - HC : Whether notice under Section 158 BC cannot be treated as invalid in view of the provisions as contained in section 292B of the Act – section 292B has no application - HC
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• Tax Deductions Denied: Manuscript Editing, Scanning, and Redrawing Not Considered Manufacturing u/ss 80-IA/IB.

  Case-Laws - AT : Deduction u/s 80-IA/IB - manuscripts edited and formatted into desired pages and also certain drawings are also scanned and redrawn by using computer. - no manufacture - no deduction - AT
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Customs

• Amendment to Notification No. 36/2001-Customs: New Tariff Values for Palm Oil, Palmolein, Crude Soybean Oil, and Brass Scrap.

  Notifications : Amends Notification No. 36/2001-Customs (N.T.), dated the 3rd August, 2001 - Palm oil, Palmolein, Soyabean Oil (Crude) and Brass Scrap (all grades) - Traiff Values - Notification
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DGFT

• Import Policy Update: Free Import of Arms & Ammunition for Sportspersons & Sports Bodies under Chapter 93, Schedule 1.

  Notifications : Amendments in Policy Condition No. 1 under Chapter 93 in Schedule 1 - Import Policy of ITC(HS)-2012 - Import of arms (including parts thereof) & ammunition is permitted freely to the following sports persons/sports bodies. - Notification
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• Bangladesh-India Border Haats in Meghalaya: Boosting Local Trade, Cultural Exchange, and Economic Growth per DGFT Guidelines.

  Circulars : Trade in Border Haats across the border at Meghalaya between Bangladesh and India. - Public Notice
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Corporate Law

• India Forms Committee to Reform Business Regulations, Enhance Economic Growth, and Attract Investment by Streamlining Processes.

  Circulars : Constitution of Committee for Reforming the Regulatory Environment for doing Business in India. - Circular
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• National Advisory Committee Formed to Guide Accounting Standards Under Companies Law for Better Transparency and Compliance.

  Notifications : Constitution of National Advisory Committee on Accounting Standards - Notification
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• Amendment to National Advisory Committee on Accounting Standards Aims to Enhance Oversight and Effectiveness in Accounting Practices.

  Notifications : Amendment in National Advisory Committee on Accounting Standrads Constitution - Notification
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• Court Must Decide Mortgage Enforcement by Sale, Not Arbitration Tribunal.

  Case-Laws - SC : Suit for mortgaged property – suit being one for enforcement of a mortgage by sale, it should be tried by the court and not by an arbitral tribunal - SC
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Service Tax

• International cricket players appeal 20% pre-deposit order in service tax dispute under Business Support Service category.

  Case-Laws - AT : Business Support Service - appellants are international cricket players - pre-deposit ordered equal to 20% - AT
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Central Excise

• Court Condones 525-Day Delay in Central Excise Case with Rs. 5000 Cost Imposed.

  Case-Laws - AT : Condonation of delay of 525 days - Subject to the cost of Rs. 5000/-, delay condoned. - AT
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• Clarification on SSI Exemption: Management or Interest-Free Loans Alone Don't Make a Unit Dummy Under Central Excise Laws.

  Case-Laws - AT : SSI exemption - mere fact of management, control or grant of interest free loan is not sufficient to hold the units as a dummy unit in the absence of any money flow back and/or profit sharing and total control on another unit - AT
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• Rule 8 Doesn't Exempt Assessee from Meeting Key Duty Payment Conditions for Rebate Claim u/r 18, Central Excise Rules.

  Case-Laws - CGOVT : Provisions contained in Rule 8 does not absolve the assessee from substantial conditions of payment of duty of claim of rebate of duty under Rule 18 of Central Excise Rules, 2002 - CGOVT
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• Documentary Evidence Trumps Oral Statements in Central Excise Cases to Ensure Fair and Reliable Judicial Decisions.

  Case-Laws - AT : It is well settled law that such documentary evidences are required to be given preference over the oral statements. - AT
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VAT

• Court Upholds Three-Year Limit for Revising VAT and Sales Tax Orders as Reasonable and Sufficient.

  Case-Laws - HC : Period of limitation for revision of the order - Three years period cannot be said to be a very long period - HC
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• Ujala Supreme Tax Case: Court Rules Product Retains AVP Characteristics, Eligible for 4% VAT Rate Instead of 12.5.

  Case-Laws - HC : Ujala Supreme - rate of VAT - 4% OR 12.5% - highly diluted form of Acid Violate Paste (AVP) - it retains the essential characteristics of AVP - taxable @ 4% - HC
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Case Laws:

• Income Tax

• 2012 (10) TMI 487
  Bogus unexplained credit - Addition made u/s 68 - reopening of assessment - CIT (A) deleted the addition - Held that:- The CIT (A) found as a fact that the assessee had duly filed the documentary evidence concerning these two parties before the AO in the form of confirmation from the investor company, its acknowledgement of return, PAN, Board’s Resolution, Form Nos.18 and 32 filed with the ROC, bank statement and audited balance sheet. This documentary evidence was found to support the identity of the investor companies and to establish the genuineness of the share capital money transaction. AO had not brought any material on record to prove that the money in question was the assessee’s own undisclosed income & had simply explained the modus operandi involved in accommodation entry transactions and had merely relied on the information received from the Investigation Wing, without verifying the facts, that from the evidence on record, it was observed that the subscription of share capital was received by the assessee from the two investor companies through cheques and the companies were duly registered with the ROC and that it had been submitted on behalf of the assessee that the companies were having PAN and were regularly filing their returns of income, but the AO had not tried to ascertain their latest addresses from the assessee, for conducting any further inquiry in their cases, thus In the absence of these inquiries and non-verification of the details at the time of assessment proceedings, the factual findings recorded by the Assessing Officer were incomplete and sparse - in favour of assessee.

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• 2012 (10) TMI 486
  Unaccounted labour charges - CIT(A) deleted the addition - Held that:- Considering the comparative position of the year under appeal and the immediately preceding year the percentage of labour charges to the export turnover has reduced to less than half of the immediately preceding year which was accepted by the Revenue. Thus even when the assessee’s accounts are to be rejected and income has to be computed to the best judgment of the AO, there would not be any justification for disallowance of even part of the labour expenses. Even in a best judgment assessment there would not be any justification for making any addition, especially when the percentage of net profit is also better than the preceding year - against revenue.

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• 2012 (10) TMI 485
  Income from sale purchase of shares - income from short term capital gain v/s business income - Held that:- Habitual dealing in a particular item is indicative of the assessee’s intention of trading. Merely for taking benefit of provisions of sec. 111A applicable from the AY 2005-06, the assessee can not be categorised as an investor, especially when the aforesaid facts speak otherwise and lead to the conclusion that the assessee is indulging in activities of a trader in shares - the character of a transaction cannot be determined solely on the application of any abstract test or rule and the cumulative factors affecting the transactions have to be seen The voluminous share transactions were in the nature of the business, purchase of shares by them was not for the purpose of earning dividend, but with the dominant intention of resale in order to earn profits, the profit made by the assessee is not of mere enhancement of value of the shares, but is a profit made in the carrying on of a business scheme of profit making & huge volume of share transactions, the repetition and continuity of the transactions, give them a flavour of “trade”, the magnitude, frequency and the ratio of sales to purchases on the total holdings is evidence that the assessee had not purchased the shares as an investment, but with the intention to trade in such scrips. Thus the CIT(A) was not justified in accepting the claim of the assessee as investor in shares. Accordingly the findings of the CIT(A) are vacated and restore the order of the AO - against assessee.

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• 2012 (10) TMI 484
  Low GP ratio - Addition by rejecting books of accounts u/s 145 - Held that:- The addition for low GP has been made primarily on the ground that the proper books of accounts have not been produced by the assessee before the lower authorities whereas assessee submitted that the required books and documents were produced but were not considered, thus in the interest of justice the matter is remitted to the file of AO to consider the case afresh - in favour of assessee for statistical purposes. Disallowance of deduction u/s. 80G - Held that:- Disallowance has been made in the absence of the proper evidence submitted by the assessee. Thus it proper and fit to remit this issue to the file of the AO to consider the same afresh as assessee has now claimed to have proper documentary evidence - in favour of assessee for statistical purposes. Disallowance of expenses - advertisement, business promotion & diwali - Held that:- As the issue discussed on account of low GP has been remitted back to the file of the AO for de novo consideration, hence this issues is also to be remitted back - in favour of assessee for statistical purposes.

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• 2012 (10) TMI 483
  Addition on account of computation of Annual Letting Value - CIT(A) deleted the addition - Held that:- The only reason given by the Assessing Officer for making the addition was his finding in the assessment year 1996- 97 which have been set aside by the CIT(A) and the findings of the CIT(A) have become final. Therefore, no basis is left with the Assessing Officer for making the enhancement in the ALP adopted by the assessee - In the light of view taken by the co-ordinate Benches in the preceding years on the identical issue, especially when the Revenue have not placed any material, controverting the aforesaid findings of the CIT(A) to enable to take a different view in the matter to interfere is required - in favour of assessee. Addition on account of expenditure not pertaining to business - CIT(A) deleted the addition - Held that:- The assessee consistently followed the system of allocating direct expenses to the respective heads viz. house property and business income while indirect expenses were allocated in the ratio of 40:60 between house property and business income. Since the portion of expenses relating to house property income had already been disallowed by the assessee suo moto, keeping in view the past history and method followed by the assessee, the CIT(A) was of the opinion that the AO was not justified in making further disallowance of expenses since certain expenses were required for maintenance of the corporate structure of the assessee. In view of consistent practice followed by the assessee, especially when the Revenue have not placed any material controverting the aforesaid findings no different view in the matter is called for - in favour of assessee. Disallowance of set off of speculation loss - CIT(A) deleted the addition - Held that:- The term 'derivatives' in which underlying asset is shares, would fall within the meaning of 'commodity' used in s. 43(5) and that cl. (d) of s. 43(5) introduced by Finance Act, 2005 w.e.f. 1st April, 2006 was prospective in nature and would be effective from the date from which the legislature made it effective, i.e. AY 2006-07 onwards. The case of the assessee relates to AY 2008- 09 and therefore, applicability of aforesaid cl. (d) of s. 43(5) of the Act is required to be examined - since neither the AO nor the CIT(A) examined the applicability of said clause (d) nor relevant facts and figures are before us it fair and appropriate to set aside the order of the CIT(A) and restore the matter to the file of the AO for deciding the aforesaid issue afresh.

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• 2012 (10) TMI 482
  Penalty u/s 271(1)(c) - Held that:- The assessee did not discharge the onus regarding credit of cash in the name of two partners in the books of the firm, instead, in response to a query by the AO, seeking evidence in support of aforesaid cash, the assessee surrendered to tax the amount of Rs.30 lacs on 30.3.2007. Subsequently, in response to a show cause notice before levy of penalty, the assessee did not explain the source of cash introduced in the name of two partners nor submitted any further explanation, establishing their bonafide. Also, the assessee did not improve upon his case in the penalty proceedings. Before the ld. CIT(A) or even before us, no attempt was made to establishing the source of aforesaid cash, thus he assessee's explanation has not been found to be bona fide and it failed to furnish all relevant material particulars relating to the concealed income and to discharge its burden that lay upon it under Explanation 1 to section 271(1)(c). A very heavy onus is placed on the assessee to explain the difference between the assessed income and returned income and the assessee in the instant case did not discharge the said onus, thus no hesitation in upholding the order of the CIT(A) in confirming the penalty imposed by the AO u/s 271(1)(c) - against assessee.

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• 2012 (10) TMI 481
  Rejection of request for extension of time to pay the balance amount of tax by Ist respondent - Held that:- As the assessee aggrieved by order 1st respondent has filled appeal to the 2nd respondent he is directed to dispose of the appeal filed by the petitioner on merits and in accordance with law, within a period of three months from the date of receipt of a copy of this order. The 1st respondent is directed not to recover the balance amount of tax, payable by the petitioner, before final orders are passed, by the 2nd respondent.

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• 2012 (10) TMI 480
  Ex party Order passed by CIT(A) - appellant contested against no intimation about service of notice - Held that:- As is apparent from the facts of the case, none of the notice dated 21.01.2010, 30- 09.2011, 12.12.2011, 14.02.2012 and 16.04.2012 issued by the CIT(A) appear to have been served upon the assessee nor the DR placed any material regarding service of any of these notices. Also CIT(A) dismissed the appeal without even analyzing the issues or recording his specific findings on the said issues raised in the grounds of appeal before him. This approach of the CIT(A) is not in accordance with law. A mere glance at the impugned order reveals that the order passed by the CIT(A) is cryptic and grossly violative of one of the facets of the rules of natural justice, namely, that every judicial/quasi - judicial body/authority must pass reasoned order, which should reflect application of mind by the concerned authority to the issues/points raised before it. The application of mind to the material facts and the arguments should manifest itself in the order - As CIT(A) has not passed a speaking order on various issues raised before him it is fair and appropriate to set aside the order of the CIT(A) and restore the matter to his file for deciding the issues afresh - in favour of assessee for statistical purposes.

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• 2012 (10) TMI 479
  Converting limestone into limestone powder - whether the process is a manufacturing activity within the meaning of Section 80IA and 80IB - Held that:- As decided in Lucky Minmat Pvt. Ltd. Versus Commissioner of Income-Tax [2000 (8) TMI 6 - SUPREME COURT] the conversion into lime and lime dust or concrete by stone crushers can legitimately be considered to be a manufacturing process while the mere mining of limestone and marble and cutting the same would not be so considered. The observation of the Supreme Court cannot be termed to be ‘obiter dicta’ since the Supreme Court has held that the process of conversion of limestone into lime and lime dust is a manufacturing process - in favour of the assessee

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• 2012 (10) TMI 478
  Interest earned on deposits made out of the non-SLR funds - Deduction under Section 80P(2)(a)(i) - Held that:- As decided in Mehsana District Co-operative Bank Ltd. Versus Income-Tax Officer [2001 (8) TMI 15 - SUPREME COURT] no dispute with the preposition that the word attributable is much wider in scope than derived. The Legislature has used the words “attributable to” in conjunction with the phrase “any one or more of such activities”. Investment of the funds by the banks including the non reserves were part of the banking activities since no bank would like its reserve funds to remain idle and not earn any interest. This is not only prudent business management but is also a part of the activity of banking. Therefore, the interest earned on such deposits is directly attributable to the business of banking - in favour of assessee.

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• 2012 (10) TMI 477
  Interest granted to the land owner on enhanced amount of compensation - Calculated on year to year basis or in the year in which the amount is actually credited to the landowner - Held that:- As decided in CIT, Faridabad Versus Ghanshyam (HUF) [2009 (7) TMI 12 - SUPREME COURT] interest is different from compensation as interest paid on the excess amount under Section 28 depends upon a claim by the person whose land is acquired whereas interest under Section 34 is for the delay in making payment. As the amount in question is to be treated as part of compensation itself and is not to be treated as interest. Therefore, the question of law framed above does not survive any more.

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• 2012 (10) TMI 476
  Depreciation on leased out boilers - disallowance as the transactions was only loan transactions subsequently given the colour as lease transactions - Held that:- Persuing grounds of appeal raised before this Court reveals that nowhere the assessee had questioned the findings of fact as regards the genuineness of the lease transactions. A reading of the various grounds raised thereon shows that it relate to claim of depreciation. Thus, when the finding of fact on the genuineness of the transaction had not been challenged in the manner known to law and the same having attained finality, there exists no ground to interfere with the order of the authorities below rejecting the claim for depreciation. No useful purpose would be served by permitting the assessee to file additional grounds on the genuineness of the lease transaction - against assessee.

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• 2012 (10) TMI 475
  Addition made u/s 68 on account of share application money received from non-existent companies viz O Ltd and M Ltd - Revenue contended that ultimate beneficiaries introduced cash in accounts such as M/s S and then transferred to entities like O ltd and M Ltd in the form of cheque and from there it reached to the ultimate beneficiaries in the form of share application money or unsecured loans - whole process of layering was done only to give this money laundering activity a colour of genuineness - in the absence of identity, credit worthiness and genuineness of such transactions, the share application was treated as unexplained income u/s 68 Held that:- It is found that O Ltd and M Ltd are non-existent companies, therefore, their identity is even in dispute. The transaction made with the non-existent entity cannot be said to be genuine rather a circuitous method has been devised by the assessee itself to enroute its own money through these camouflage routes. Inspite of sufficient opportunities and summons issued u/s 131, the identity and credit worthiness was not established. It is not the case that no opportunity was provided to the claimed share applicant. Right from the assessment stage, first appellate stage and even before the Tribunal, no effort was made by the assessee to prove the required ingredients of section 68, therefore, order of CIT(A) in upholding addition is affirmed – Decided in favor of Revenue

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• 2012 (10) TMI 474
  Addition made on account of rejection of books – Held that:- As there is no allegation in order of lower authority about the correctness or completeness of books, sales recorded, method of accounting. Only allegation is that accounting standard has not been followed in valuation of inventories and sales are not amenable to verification. The valuation of stock has no negative impact on the overall result of this year as shown at cost. Decides in favour of assessee. Disallowance of bad debts claim u/s 36(1)(vii) – Assessee claims bad debts of advances made to parties for promoting the business since they are outstanding from long time – Held that:- As the purpose of advances is not ascertainable. Assessee failed to filed his past accounts and particular the account for the year in which the money was advanced has also not been furnished. Therefore contention that the amount was given for promoting business is not substantiated. Decision in favour of revenue.

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• 2012 (10) TMI 473
  Fees for Market Development Overseas - Revision u/s 263 - Held that:- Giving marketing services outside India, even if we consider it as technical services, nothing was made available to the assessee in the nature of any technical knowledge, experience, skill know-how or processes. There was no development or transfer of any technical plan or technical design. CIT in his order under Section 263 has not pointed out any sort of similar transfer or any sort of technical knowledge being made available to the assessee. Twin conditions required for invoking Section 263, that there should be an error in the order of Assessing Officer and such error should be prejudicial to the interests of Revenue, have not been satisfied. - in favour of Assessee.

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• 2012 (10) TMI 472
  Disallowance of discount paid/given to advertising consultants - Appellant has paid a sum of Rs. 49,93,84,045/- towards agents commission for sale of space for advertisements in newspapers and time slots for television broadcasting. Held that:- The relationship between advertising consultant and the appellant, is on principal to principal basis, and not as an agent and principal for the reason that the advertising consultant neither act on the directions of the appellant nor rendered any services on behalf of the appellant to the advertisers. This is evident from fact that advertising consultant has to pay the bills of the publisher/broadcaster irrespective of the collections from their clients. As no services are rendered by the advertising consultant to the appellant, and further no payment/credit is made by the appellant, who is the publisher/broadcaster, to the advertising agency, the appellant is not liable for making any TDS and therefore, no disallowance can be made u/s. 4O(a)(ia) of the Act, for the said amount of Rs. 49,93,84,045 allowed towards discount to the advertising consultants.therefore, the payment by the assessee- company to accredited advertising agencies could not be terms as payment of commission and, therefore, the provisions of section 194H were not applicable to the instant case - against revenue. payment of data circuit rentals to BSNL - Assessee had incurred an amount of Rs. 8,68,80,460/- towards data circuit lines charges, which was paid to BSNL. The AO disallowed the said amount applying the provisions of section 40(a)(ia) on the ground that the assessee had not deducted any tax (TDS) on such payments. On appeal, the CIT(A) deleted the disallowance made by the AO observing that though in the assessment the AO has mentioned that the said payment made by the assessee to BSNL towards contractual obligation, he has not clarified as to how there is a contractual obligation for the said payment. Held that:- U/s 194C, tax is required to be deducted when an assessee as contractee, makes payment to another person/party, which is a contractor, for execution of work. Since in this case there is no contract involved, provisions of section 194C are not applicable to the said payment made by the assessee to BSNL. There is no evidence to show that borrowed funds were used for the purchase of assets which had not been put to use. Therefore, we do not find any ground to interfere with the order of the CIT(A) and the same is hereby upheld - ground of appeal of the revenue is dismissed.

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• 2012 (10) TMI 471
  Deduction u/s 80IB - SSI Benefit - Held that:- The assessee had Plant and Machinery much exceeded the limit of Rs. 3 crore applicable to an SSI on the last day of the previous year. Assessee cannot be considered as a Small Scale Industrial Undertaking within the meaning of sec. 11-B of the IDR Act, 1951 as on the last day of previous year relevant to the A.Y. 2008- 09. Since the assessee did not comply with the conditions of the Proviso to clause (iii) of subsection 2 of section 80IB, it is not eligible for claiming deduction u/s 80B of the Act - appeal of the assessee is dismissed as infructuous - against the assessee.

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• 2012 (10) TMI 470
  Unexplained Cash Credits - CIT(A) On remand report of the assessing officer and reply of the assessee classified the loans into two categories, viz. loans pertaining to the period prior to commencement of business, and loans pertaining to the period subsequent to the commencement of business by the assessee. As decided by Court in case of [CIT V/s. Kapur Bros 1978 (10) TMI 26 - ALLAHABAD HIGH COURT] CIT(A) held that any cash credit introduced before the commencement of business cannot be added in the hands of the firm, as the firm has not earned any income or made any sale. He accordingly directed the assessing officer to identify the cash credits which were made prior to the commencement of business and delete the additions made in that behalf. As for the other cash credits relating to the period subsequent to the commencement of business, the CIT(A) confirmed the additions made by the assessing officer in that behalf. Aggrieved by the relief granted by the CIT(A), Revenue is in appeal, whereas the assessee preferred its appeal objecting to the addition sustained by the CIT(A). Held that:- It is for the assessee to prove the genuineness of a cash credit not only by establishing the identity of the creditor, but also his creditworthiness and the genuineness of the transaction, and unless all the three ingredients are satisfied, genuineness of a cash credit cannot be accepted. In the circumstances, the order of the CIT(A) is upheld with regard to cash credit additions relating to the period subsequent to the commencement of business by the assessee - Grounds of the assessee as well as the Revenue are dismissed.

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• 2012 (10) TMI 469
  Taxability of Deemed Dividend - Shri K.Pratap is a shareholder the companies in his individual capacity, and the assessee company itself is not the shareholders - Held that:- the appellant company is not a shareholder in M/s. Golden Gate Properties Ltd. and therefore the provisions of section 2(22)(e) are not applicable. Advance of Rs.1,23,50,000 received by the assessee company cannot be treated as deemed dividend. In this view of the matter, we find no infirmity in the impugned order of the CIT(A), which is accordingly confirmed, and the grounds of the Revenue in its appeal are dismissed - in favour of assessee. Addition made in Income by Assessing Officer - Appeal by Assessee - Assessee contended that in Survey which take place in premises of assessee director of the assessee company, Shri K.Pratap, admitted an additional income tax of Rs.5,00,000 for the financial year 2006-07 relevant to the assessment year 2007-08, but did not offer the corresponding income for the assessment year 2007-08. Not convinced with the explanation of the assessee in this behalf, the assessing officer made an addition of Rs.15,00,000/- to the income returned by the assessee, to cover the income relatable to the additional income tax admitted at the time of survey, to be paid for the year under appeal. Held that:- Impugned addition made by assessing office is merely based on the above statement and without pointing out any deficiencies in the books of account or bringing on record any material to substantiate the addition of Rs.15,00,000 is not justified and has to be disallowed - in favour of assessee.

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• 2012 (10) TMI 468
  Labour Charges - register does not contain the addresses of the labourers nor it contains revenue stamp, nor is it signed by the Labour Department, no PF has also been deducted - Held that:- Violation of any law as long as the payment does not become illegal on account of such violation the same cannot be hit under the Income Tax Act - Appeal dismissed against revenue. Payment to supervisors - Held that:- Direction of CIT(A) to delete out of labour charges of Rs. 31,01,255/- which was admitted by the assessee before ld. CIT(A) as not payments to the supervisors but to the contractors is justified as this ground is misconceived and does not arise on the order of the lower authorities - appeal by revenue dismissed. Rental payments/Hire charges - Held that:- provisions of section 194I has been amended to encompass within its provision, the hire charges in respect of plant and machinery w.e.f. July, 2006 - CIT(A)has rightly deleted the amount of Rs. 8,15,000/- added u/s. 40(a)(ia) made by the Assessing Officer as the said provision does not apply for the assessment year under appeal. Disallowance in respect of slurry removal expenses,Repair & Maintenance Charges - Held that:- slurry removal expenses has been categorically shown in respect of tankers and lorries on which the assessee has reimbursed the expenses and this break-up has not been disproved nor shown to be wrongly claimed by the assessee. finding of the ld. CIT (Appeals) on this issue is on a right footing and does not call for any interference - revenue's appeal stand dismissed.

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• 2012 (10) TMI 467
  Notice - Recall the order - delay of nine years - petitioner filed an appeal Tribunal on 27.12.2001 - case of the petitioner is that there was no communication from the Tribunal subsequent to the filing of the appeal regarding its status and the petitioner continued to be under the bona fide impression for over a period of nine years that the appeal filed by him is pending disposal - petitioner received a demand notice on 4.1.2011 – Held that:- Tribunal was obliged to inform the petitioner - but neither the regulation nor the Act provides for such an eventuality - Regulation 52 of the Regulations no doubt contemplates that every order passed by the Tribunal is required to be communicated within a specified time. But however, that once again pre-supposes that the proceedings must have been disposed of on merits - inordinate delay of nine years has not been explained by the petitioner. The order passed rejecting the Misc. Petition cannot be faulted. It is no doubt true that sufficient cause is required to be construed liberally but however, not so liberal so as to make it redundant and inoperative. Petition stands rejected

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• 2012 (10) TMI 466
  TDS u/s 194C of the IT Act - contract of work versus contract of sale - assessee has entered into a contract of manufacturing agreement with M/s Nicholas Piramal to manufacture certain products - M/s Nicholas Piramal was required to perform quality control testing of products - assessee reimbursed the validation charges to M/s Nicholas Piramal without deducting tax at source – Held that:- It is not clear as to the party which has to bear the expenses relating to the said quality control tests - in view of the statements of the assessee that there are certain documents to establish liability of the assessee to reimburse the expenditure to M/s Nicholas Piramal and in the interest of justice – matter remanded back to the AO Depreciation on machinery - whether it is used for the purpose of assessee's business or profession - assessee has entered into contract for manufacture of certain ophthalmic solutions and for the said purpose the machinery was purchased and installed in the premises of M/s Nicholas Piramal during the relevant financial years – Held that:- Manufacturing is done as per specification of the assessee and the goods are also recognized as manufactured by the assessee, since they are sold in the brand name of the assessee - it can be said that the goods are manufactured by the assessee itself. When the machine is being used for the manufacture of goods for the assessee, it cannot be said that they are not used for the purpose of business or profession of the assessee - assessee is entitled to depreciation on this machinery Denial of depreciation on plant & machinery – Held that:- Machinery though, was purchased in the year 1995-96, but was put to use in FYs: 1997-98 & 1998-99 - machines were written off in the books of assessee as obsolete in the FY: 1998-99, but was added in the computation of income filed along with its tax return for the assessment years 1999-2000 - assessee ought to have reduced the written down value of the said machinery from the block of assets and ought to have claimed depreciation on the balance of the block of assets – denial of depreciation upheld

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• 2012 (10) TMI 465
  Terminal depreciation - revenue expenditure or capital - assessee had acquired land and put up a factory during 1995 - in 2003, the assessee had stopped its business of offset printing and typesetting and it had converted the land and building into stock in trade – Held that:- For claiming depreciation u/s. 32(1)(iii), it must first comply with the provisions of Sec. 32(1) of the Act that the asset is used for the purpose of business or profession. As the asset being the land and factory building, the assets were used in the business of offset printing and typesetting, which was discontinued business from 2003, the provisions of Sec. 32(1) is no more available in regard to such business as the business itself does not exist - As the business in respect of which the said development cost has been incurred is discontinued, the same cannot be claimed as revenue expenditure in respect of another business being real estate business, just because the land has been converted into stock in trade for the present business - appeals of the Revenue are allowed

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• 2012 (10) TMI 464
  Unexplained cash credits – Held that:- assessee has discharged the burden that lay on him, then it could not be said that such a conclusion was unreasonable or perverse or based on no evidence - mere non-appearance of eight other persons in response to the notice given by the AO, by itself cannot be a reason to discard their version particularly when one of them had appeared and admitted advancement of loan. Even if others have subsequently filed their confirmations supported by their affidavits, it cannot be assumed that they would not have made same statements, if they had appeared in response to the notice issued by the AO. AO was required to have examined those confirmations and the contents of the affidavits on their merits treating as if they were statements given to him - there was no reason to doubt correctness of the claimed cash credit taken from the creditors - in favour of the assessee - appeal dismissed

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• 2012 (10) TMI 444
  Income from other sources v/s profit and gains from business and profession - gift from UK based company - Held that:- The transaction is of a gift which is a capital receipt in the hands of the assessee and therefore it cannot be said to be a case of any benefit or perquisite arising from business. The contention of the DR that by the said transaction the assessee has derived benefit and such benefit has arisen from the business connection of the donor and the donee, cannot be accepted as no direct nexus has been established by any tangible material brought on record by the Ld.CIT [A]. Simply because both the donor and the donee happened to belong to the same group cannot ipso facto establish that they have any business dealings. Thus in the absence of any specific provision taxing a Gift as a deemed business income, provisions of sec. 28 [iv] cannot be applied on the facts of the case. The CIT [A] erred in taxing the value of the stamp duty as income under sec. 28 [iv] - the provisions of sec. 28 [iv] and sec 56 [1] & [2] will not apply - in favour of assessee. Taxing notional income from the flats as Income from House property - Held that:- The said flats are shown under the head 'fixed assets' in the balance sheet of the assessee company & have been kept for use for the employees of the company cannot be brushed aside lightly. However, for the year under consideration, the assessee could not establish the usage of the flats by the company for its business purposes, therefore, annual letting value of the flats is liable to be taxed as per the Municipal rateable value, therefore this issue is restored back to the files of the AO - in favour of assessee for statistical purposes. Disallowance of maintenance charges and depreciation - Held that:- ALV has to be taxed for the year under consideration, the assessee will get the statutory deduction of 30% from the ALV, therefore no separate deduction of maintenance charges is to be allowed & that the assessee has failed to establish the flats have been used for the purposes of business for the year under consideration, the depreciation claimed cannot be allowed - against assessee. Addition of consultancy fees - Held that:- Direction of the CIT(A) to verify the correct figure of the consultancy fee receivable during the year whether it is USD 10,50,000 or USD 11,50,000. Accordingly, while deleting the addition made by the AO issue remitted back to AO with a direction to verify the actual figure of consultancy fee for the year under consideration.

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• 2012 (10) TMI 443
  Reopening assessment u/s 147 - AY 1997-98 & 1998-99 - Held that:- There is nothing in the reasons to indicate, even remotely, that the assessee did not disclose this necessary fact in its return or accompanying documents. It can naturally not be so because the deduction on account of interest paid to head office and overseas branches can only be claimed by way of a debit to the Profit and loss account which is always a part and parcel of the documents accompanying the return of income. Once the assessee disclosed the fact of claim of deduction on account of interest paid to head office or other overseas branches and the original assessment was completed u/s 143(3) accepting such claim, there can be no question of initiation of reassessment proceedings after a gap of four years from the end of relevant assessment year - in favour of assessee. Reopening of assessment - AY 1999-2000 - Held that:- The issuance of notice u/s 148 is within a period of four years from the end of the relevant assessment year - as decided in Multiscreen Media Private Limited v. Union of India [2010 (2) TMI 269 - BOMBAY HIGH COURT reopening on the basis of finding in an order of assessment passed for a subsequent assessment year, where additional material has emerged before the A.O. to lead to the formation of belief that income chargeable to tax had escaped tax, is sustainable. The facts of the instant case stand on a rather stronger footing because here the reassessment is on the basis of the CIT(A)'s order for a subsequent year, thus the initiation of reassessment proceedings for the current year is in order - against assessee. Non deduction of TDS - Disallowance of interest payable to head office and other overseas branches - Held that:- As decided in Sumitomo Mitsui Banking Corporation v. DDIT [2012 (8) TMI 450 - ITAT, MUMBAI] the interest paid to the head office of the assessee bank by its Indian branch cannot be taxed in India in the hands of assessee bank, a foreign enterprise being payment to self which cannot give rise to income that is taxable in India as per the domestic law - as interest paid by the Indian branch is not chargeable to tax in India, it follows that the provisions of section 195 would not be attracted and there being no failure to deduct tax at source from the said payment of interest made by the PE - in favour of assessee. Disallowance of inter office commission paid/payable by the assessee to head office and other overseas branches - Held that:- Since the principle of mutuality is applicable on transactions between Indian branch and head office and other overseas branches, there cannot be any income or any expenditure due to such internal transactions. As the inter office commission has been paid by the assessee to its head office and other overseas branches, it is obviously a transaction with the self. Accordingly the rule of mutuality applies and the assessee cannot be allowed any deduction in this regard. The view taken by the learned CIT(A) on this issue is upheld - against assessee. Interest u/s 234B - Held that:- As decided in DIRECTOR OF INCOME-TAX (INTERNATIONAL TAXATION) Versus NGC NETWORK ASIA LLC [2009 (1) TMI 174 - BOMBAY HIGH COURT] when the duty is cast on the payer to deduct tax at source, on failure of the payer to do so, no interest can be charged from the payee assessee u/s 234B, thus ssue of charging of interest u/s 234B in the present case is no more res integra - in favour of assessee. Penalty u/s 271(1)(c) - disallowance u/s 40(a)(i) & income of the head office/foreign branches - Held that:- When the additions made in the assessment order have been deleted, obviously there cannot be any foundation for imposition of penalty qua such additions - in favour of assessee.

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• 2012 (10) TMI 442
  Refusal to grant renewal u/s 80-G - ITAT allowed the claim as registration of assessee trust u/s 12-AA is still subsisting - Held that:- The object of Section 80-G moves further and beyond registration under Section 12-AA to provide for deductions in respect of donations to certain trusts/charitable institutions. Once the registration under Section 80GG has been granted, for which the registration under Section 12-AA is also necessary, the renewal cannot be refused, unless any material, which may either be withheld or concealed, has come to the notice of the Commissioner or that the Commissioner, on examining of the application of funds or income come to a conclusion, that the income has been used for the purposes other than the purposes for which the registration under Section 80GG was granted. As the registration under Section 12-AA has not been cancelled in the present case and the application for allowing benefit under Section 80-G was also allowed in the previous years. The trust has not added any new object in the trust deed nor there is any material by way of balance sheet or the utilisation of the income of the trust to come to a conclusion that activities which are not for charitable purpose the order of the Tribunal does not suffer from any error of law - in favour of assessee.

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• 2012 (10) TMI 441
  Penalty u/s 271D - whether provisions of section 269SS are attracted to the amounts received from sister concern as Temporary accommodation to meet immediate requirements of the business and is levy of penalty u/s271D justified - Held that:- It is not in dispute that the assessee had transaction with its own sister concerns having the commercial transaction and during that course, they used to pay the amount through cheque or cash. It cannot be said that the transactions could not have been business transactions and during the course of the transactions, some payments have been made in cash. Otherwise also, it may only be a technical mistake retaining certain loans of one party, thus imposing penalty cannot be justified - in favour of assessee.

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• 2012 (10) TMI 440
  Late payment of TDS u/s 40(a)(ia) - whether amendment made to the provisions of section 40a(ia) would apply with retrospective effect from 1.4.2005 or w.e.f 1.4.2010 ? - Held that:- As decided in COMMISSIONER OF INCOME TAX, KOL-XI, KOL Versus VIRGIN CREATIONS [2011 (11) TMI 348 - CALCUTTA HIGH COURT] the amendment to the provisions of Sec.40(a)(ia) of the Act, by the Finance Act, 2010 is applicable retrospectively from 1.4.2005. Consequently, any payment of TDS on or before the due date for filing return of income u/s.139(1) cannot be disallowed in terms of provisions of sec.40a(ia). As in the instant case the assessee deposited the tax deducted at source on 29.5.2007 i.e. before the due date for filing return of income u/s.139(1) and especially when the Revenue have not brought to notice any contrary decision, no interfere with the findings of the CIT(A) is called for.

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• 2012 (10) TMI 439
  Reopening of assessment u/s 147 - loss on trading of shares - Held that:- The AO has made additions on different heads and no addition has been made under the head which remained the subject matter of the reasons for reopening the assessment & CIT (A) has upheld the validity of reopening has not decided the issue of validity of the notice issued u/s 148 and assessment made in furtherance thereto u/s 147 read with 143 (3) in view of the proviso to section 47, thus in the interest of justice the matter is set aside to the file of the CIT (A) to decide the same afresh - in favour of assessee for statistical purposes.

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• 2012 (10) TMI 438
  Repairs and maintenance - Capital v/s Revenue - CIT(A) deleted the addition - Held that:- CIT(A) held that the repairs were carried out to provide best patient care, excellent atmosphere and hygienic conditions. Similar repairs had been carried out in the case of another hospital of the group company where the AO had treated the repair and maintenance of the building in that case also as capital expenditure which was deleted by the Hon’ble ITAT, Chandigarh. Hence the addition here also to be deleted. Basis and reasoning given by Ld.CIT(A) are convincing and neither any contrary material is placed on record nor any higher court’s order is filed when it is otherwise a covered matter - in favour of assessee.

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• 2012 (10) TMI 437
  Validity of re-opening of assessment u/s 147/148 - research and development expenditure - dis-allowance of technical assistance fee paid as capital in nature - Held that:- It is seen that the assessee was asked to furnish the details of Research & Development expenses and the complete details including the break-up were provided by the assessee in the original assessment which was completed after considering the details and the reply of the assessee. Thus, it is seen that the facts and issue involved in the present year of appeal are identical to the facts and issue involved in AY 2001-02 wherein the Tribunal has confirmed the order of the CIT(A) holding the re-assessment proceedings as invalid. Respectfully following the same, in the present year of appeal also, re-assessment proceedings are held to be invalid - Decided in favor of assessee

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• 2012 (10) TMI 436
  Addition on account of enhancement in respect of Retention Money claimed in revised return to be not accrued – Held that:- It is trite law that as for as possible the tax should be levied on real income. The issue of warranties can be dealt in two manners. If amounts are received than make a provision for warranties in P & L A/c on reasonable parameters which is conventionally allowed in IT assessments. In case of amounts not received, the second method can be to treat the unpaid amounts as not accrued pending settlement of express warranty issues, which is the situation in assesses case. The appellant has undertaken the project and was duty bound to give satisfactory performance as per warranty. For satisfactory execution of contract as also removal of defects ordained by the contract, certain sum is retained. Had the appellant provided for warranty in the accounts or claimed deduction as such, the same would have been allowed. Since the amount set apart being as per agreed terms and is contractually determined, even such provision would be allowable. Therefore looking from both angles, the retention money not payable to the appellant during the year is not accrued and hence not taxable during this year – Decided in favor of assessee Dis-allowance of Work Contract Tax – Section 43B – Revenue contended that appellant failed to furnish any details/evidence for claim of WCT and hence is not allowable – Held that:- When the tax is deducted by the client in accordance with WCT Act, so far as appellant being a contractor it can be treated to have paid such tax. The revenue cannot disallow the payment and at same time tax the sum received as refund out of such payment. Amounts are allowable u/s. 43 B - additions are therefore deleted for both the years. Dis-allowance of amount disallowed in A.Y. 2007-08 for nonpayment of TDS u/s. 40(a)(ia), which is paid during the relevant financial year and hence claimed as allowable under proviso to S40(a)(ia) – Held that:- Having disallowed such sum in A.Y. 2007-08 in view of sec. 40(a)(ia) and not sec. 37, it is not open for A.O. to examine them in AY 2008-09. Amount so disallowed for non deduction or non depositing tax before due date will be allowed as a deduction in computing the income of the previous year in which such TDS was paid to govt – Decided partly in favor of assessee

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• 2012 (10) TMI 435
  Disallowance of Foreign Travelling expenses – Whether expense on which FBT has been paid are allowed, irrespective of its nature either personal or official - AO argued that assessee failed to satisfy that such expenditure was incurred wholly and exclusively for the purpose of business – Company had paid FBT on the aforesaid expenses – Held that:- As the CBDT explaining the provisions regarding the FBT makes it clear that FBT is levied on the expenses incurred by the employer irrespective of whether the same are incurred for official or personal purposes. Once FBT is levied on such expenses it follows that the same are treated as fringe benefits treated by the assessee as employer to its employees and the same have to be properly allowed as expenses incurred wholly and exclusively for the purpose of business. Following the decision in case of Hansraj Mathuradas (2012 (10) TMI 300 - ITAT, MUMBAI) direct the AO to delete the disallowance. Issue decides in favour of assessee Expenditure on computer software – Capital or revenue expenditure - Assessee contended that expense has been incurred only on licence to use the software and that it was mere upgradation of the software – Held that:- Expenditure on account of software does not form part of the profit making apparatus of the assessee and the same is to enable the management to conduct the assessee’s business more efficiently or more profitably and following the decision in case of Raychem RPG Ltd. (2011 (7) TMI 953 - BOMBAY HIGH COURT) direct the AO to allow the software expenditure as Revenue in nature. Issue decides in favour of assessee Disallowance u/s 40(a)(ia) – Non deduction of TDS – Assessee has not deducted TDS on payment of lease rent – Held that: As the assessee has paid entire lease rent on 20-05-2005 could not be controverted revenue. Since no amount of the lease rent is payable as on 31-03-2006, therefore, in view of the decision in case of Merilyn Shipping and Transport (2012 (4) TMI 290 - ITAT VISAKHAPATNAM), no disallowance u/s. 40(a)(ia) can be made. Issue decides in favour of assessee

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• 2012 (10) TMI 434
  Addition on account of transfer pricing – Whether AO issue notice u/s 133(6), to comparable companies to gather information in relation to transfer pricing – If yes, information that was obtained u/s 133(6), whether the same was put across to the assessee – Held that:- AO can collect information about comparable by issuing notices u/s 133(6). Any information obtained in the course of assessment proceedings has to be supplied to the assessee for its objections, if any. The absence of doing so leads to violation of fundamental principle of natural justice. Therefore case remand back to AO. Addition on account of foreign exchange fluctuation gain on export u/s 10A – Whether forex gain from export is a part off profit used to calculate deduction u/s 10A - Held that:- Profit derived means profit of the business of the undertaking the same proportion as the export turnover bears to the total turn over of the business carried on by the undertaking. Profit has to be computed as normally understood without insisting on proximate connection between the business of undertaking and the profit. Therefore there is no dispute that foreign exchange fluctuation gain is in respect of export proceeds so amount represents income as it is in the revenue field. Allow in favour of assessee. Excess provision written back & miscellaneous income also constitute profit from business while claiming deduction u/s10A Disallowance of debonding charges – Debonding charges treated as revenue expenditure by assessee – Held that:- As the capital goods placed in the bonded area are subject to restrictions that they cannot be sold and they cannot be removed outside the area for use of self. This encumbrance is removed once the goods are cleared from the bonded area on payment of duty. The result is that the assessee can deal with the goods in any manner it desires including sale thereof. Therefore debonding charges should be treated as capital expenditure & added to cost/wdv of asset. Decision in favour of revenue.

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• 2012 (10) TMI 433
  Eligibility for benefits of Section 11 - Appeal is made by Revenue against the order of CIT(A) - Donations,Auditorium fee and Building fund - Held that:- Assessee has not charged any money by whatever name it is called, i.e. donation, building fund, auditorium fee etc, over and above the prescribed fee for the admission of students, the assessee would be entitled for exemption under S.11, even though the notification under S.10(23C)(vi) of the Act have not been received by it. Claim of Depreciation - Held that:- As purchase of capital asset is used to promote the objective of the trust and not for any Business Activity is allowed as application of income, depreciation is not allowable on capital asset. Entire cost of acquisition is treated as application of income and is either written off in the first year or carry-forward to subsequent years itself - issue raised by the Revenue is set aside to the file of the Assessing Officer for fresh consideration after giving reasonable opportunity of hearing to the assessee. Disallowance u/s 13(1)(c) of the Act - Held that the payment of Rs.3,60,000/- per annum as honorarium to the Secretary of society, which was not proved to be in excess of the normal and prevalent remuneration being paid for an identical services contemporaneously, cannot be considered as a “benefit” to the interested person as would attract the provisions of section 13(1)(c) and debar the appellant from claiming exemption u/s. 11. The assessing officer is therefore directed not to deny exemption u/s. 11 on this ground alone.

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• 2012 (10) TMI 432
  Exemption u/s 11 - exemption of the educational income of the Trusts, Societies etc - the main grievance of the Revenue is with regard to the conclusion of the CIT(A) that the assessee is eligible for benefits of Section 11 of the Act in alternative to the provisions of S.10(23C)(vi) of the Act. - Held that:- Assessee has not charged any money by whatever name it is called, i.e. donation, building fund, auditorium fee etc, over and above the prescribed fee for the admission of students, the assessee would be entitled for exemption under S.11, even though the notification under S.10(23C)(vi) of the Act have not been received by it - Impugned order of the CIT(A) be set aside and restore the matter to the file of the assessing officer with a direction to verify the aspect of donation, capitation fee etc. if any collected by the assessee, after giving an opportunity of being heard to assessee. Depreciation - Held that:- As the purchase of capital asset is used to promote the objective of the trust it is allowed as application of income where the entire cost of acquisition is either written off in the first year itself or in subsequent years and depreciation is not allowable on capital asset as it is not used for Business activity - in favour of revenue for statistical purposes.

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• 2012 (10) TMI 431
  Commission paid to non resident agent - Assessing Officer found that the assessee has paid an amount of Rs.80,50,703/- to non resident agents without deducting tax at source. The AO therefore disallowed the entire amount u/s 40(a)(i) and added it to the total income.The CIT (A)‘s order was challenged in appeal before the ITAT. Held that:- The reasoning of the AO that since the DDs have been purchased from banks in India and have been sent through courier, the payment of commission deemed to have been paid in India is also not acceptable. - the AO has failed to bring any material on record to show that the payments were made to the non resident agents in India at the request of the foreign agents. Non resident agents did not carry out any business operations in India and has acted as selling agents of the assessee outside India. Therefore, the commission earned by them for services rendered by them outside India cannot be considered as income chargeable to tax in India as non resident do not have any permanent establishment in India Therefore, when the commission paid to the non residents are not chargeable to tax under the provisions of the Act, no deduction of tax is required to be made u/s 195(1) of the Act and disallowance made u/s 40(a)(i)by Assessing officer is not sustainable - against revenue.

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• 2012 (10) TMI 430
  Allowability of Depreciation - Held that:- Assessee is not claiming double deduction on account of depreciation as has been suggested by Ld. Counsel for the Revenue. The income of the assessee being exempt, the assessee is only claiming that depreciation should be reduced from the income for determining the percentage of funds which have to be applied for the purposes of the trust. There is no double deduction claimed by the assessee as canvassed by the Revenue. It can not be held that double benefit is given in allowing claim for depreciation for computing income for purposes of Sec.11 - in favour of Assessee. Application of income - Carry forward and set off of Losses - Held that:- there are no words of limitation in section 11 of the Income-tax Act requiring that the income should have been applied for charitable or religious purposes only in the year in which the income has arisen - It has also been held that income derived from trust property is to be determined on commercial principles and the application of such commercial principles also warrants the conclusion that the expenditure incurred in an earlier year can be set off against the income of the subsequent year. Therefore, Orders of the lower authorities are set aside and Assessing Officer to quantify the excess application of income by the assessee-Trusts and allow carry forward of the same for set off against the surplus made by it in a subsequent year - in favour of Assessee.

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• 2012 (10) TMI 429
  Aggrieved party - right to appeal - CIT(A) dismissed the appeals by the directors as 'not maintainable - liability of directors u/s 179 - Held that:- the apprehension of the assessees that they have been made liable to pay a portion of tax u/s 179 of the Act, is unwarranted and misconceived. As per the provisions of the Income-tax Act, no person can be made liable to pay any tax for himself or on behalf of any other entity for which he has been associated unless a specific order is passed in the matter. In the present case, no such order u/s 179 of the Act has been passed. - the appeals preferred by the assessees are dismissed as 'not maintainable'.

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• 2012 (10) TMI 428
  Applicability of Sec.50C of the Act - Held that:- sec 50C is not applicable on transfer of lease hold right - Decided against the revenue. Addition on Redeposit - Held that:- After considering the submissions of the remand report and examining the bank account, it was found that the appellant had withdrawn cash of Rs.7,25,000/- before depositing Rs.7,50,000/, In the circumstances, there is no necessity for addition of Rs.7,50,000/. The addition is restricted to Rs.25,000/- as the balance amount is explained by the withdrawal from the same bank account on the earlier dates - against Revenue. Addition on Cash Deposit of Rs.3,00,000/- Held that:- Alternate claim of the assessee could not be rejected, especially when AO was re-opening the assessment for the AY 2005-06 for verifying the source of payment for purchase of lease right. Here, it is also noteworthy that where AO has passed a non-speaking order, but the FAA had discussed the issue in length. Not only this he rejected the claim of the assesse with regard to Agricultural income. Thus stand taken by the FAA does not suffer from any infirmity - against the Revenue.

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• 2012 (10) TMI 427
  Suo motu revisional jurisdiction under s. 263 of the Act – Held that:- If the order of the AO was based on wrong assumption of facts, incorrect application of law or non-application of mind, interference was permissible - order of the AO suffers from non-application of mind - AO failed to make basic enquiry required to be made when there was unusual increase of prices of shares purchased by the assessee by cash and the identity of the persons from whom the shares were purchased and to whom the shares were sold, was not ascertained nor the broker examined - shares were not of well known company and possibility of undisclosed income being introduced in the form of capital gain was not ruled out - case was clearly within the purview of exercise of suo motu revisional jurisdiction The observations of the Tribunal that since as many as 7 hearings had taken place and that the CIT could not have raised an objection to the manner of assessment, are unsustainable in law and not warranted by legal requirement under s. 263 of the Act for exercise of suo motu revisional jurisdiction. - in favour of the Revenue

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• 2012 (10) TMI 426
  Whether notice under Section 158 BC cannot be treated as invalid in view of the provisions as contained in section 292B of the Act – Held that:- Intent and purport as provided under section 158 BC is to serve a notice on the assessee by providing a time of not less than 15 days and not more than 45 days - grant of extra time is without authority of law. It cannot validate an invalid notice - when the sum and substance of the notice issued to the assessee is not in conformity with the purpose of the Act, section 292B has no application - The waiver or the consent cannot override the provisions of statue. What is mandated cannot be diluted. - in favour of the assessee Whether section 240 of the Act is not applicable to Chapter XIV-B of the Act and therefore, the taxes paid pursuant to the return filed in the block assessment is liable to be refunded – Held that:- For Clause (b) of proviso to section 240 to apply, the taxes should have been paid by the assessee voluntarily - revenue cannot contend, that the refund adjusted is to be treated as tax paid, so as to deny the assessee the refund due, subsequently, due to annulment of assessment. Payment of taxes voluntarily is different from adjusting the refund without reference to the assessee - It cannot be held that the assessee has paid taxes and accordingly, in terms of proviso to section 240 to deny refund to the assessee - Commissioner of Income Tax (Appeals) exceeded his jurisdiction to deny the refund - in favour of the assessee Jurisdiction - refund – Held that:- Jurisdiction of the Appellate Authorities to adjudicate the issue of refund in the Appellate proceedings is consequential upon the validity of the assessment proceedings. Having recorded a finding by holding that the entire assessment proceedings are invalid, the question of the jurisdiction of the appellate authorities therefore would not arise for determination Whether Appellate Authorities should have directed the Assessing Officer to pass a fresh order of assessment in view of holding that the notice is invalid - revenue contended that if the notice was held to be invalid, the Assessing Officer should have been directed to pass a fresh order of assessment by complying with the limitation in terms of section 158BC – Held that:- Time to be granted in terms of section 158BC is mandatory. Having failed to comply with the same, granting another opportunity to the revenue is highly improper - period as specified in the Act requires to be strictly complied with. Therefore, the plea of the revenue for a direction to pass fresh orders of assessment after complying with the provisions of section 158BC requires to be rejected - in favour of the assessee

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• 2012 (10) TMI 412
  Disallowances on account of trade creditors - assessee had done no business with them during the financial year respectively, represent only opening as balances – Held that:- Account copies of the parties as appearing in the books of account of the assessee for assessment year 2005-06, 2006-07 and 2007-08 confirm the submission of the assessee. So, it is clear that no new amount had been credited by the assessee in their accounts during the assessment year under consideration. Therefore, application of section 68 was rules out and addition cannot be made - Assessing Officer has not brought on record any evidence to prove that these parties are bogus - disallowance made on account of cash credits has been correctly deleted Additions on account of unproved trade creditors – Held that:- Additions are made on the basis of the report of the Income-tax Inspector that there is no concern by such name but the assessee had filed before the Assessing Officer purchase and sale bills of the said concerns but the books of account of that concern could not be produced - assessee had made total purchases of Rs. 1,33,39,325/- and there was a carry forward opening balance of Rs. 2,04,050/-. During the period, the assessee made payments of Rs. 1,26,09,000/- and the balance amount has been shown as trade creditor of Rs. 9,34,275/-. A confirmatory letter from M/s Oriental Leathers has also been filed alongiwth copy of account showing payments having been made to the party. The ITI’s report cannot stand in view of the above evidence - addition correctly deleted

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• 2012 (10) TMI 411
  Claim of deduction u/s 80-IA/IB - denial as there is no new article or thing which comes into existence as a result of the assessee’s activity - Held that:- In the present case, the assessee receives from its customers manuscripts which are either typed or handwritten ones. After receiving the same, the assessee converts the same into typed form by typing or scanning into the computer. Thereafter the same is edited and formatted into desired pages and also certain drawings are also scanned and redrawn by using computer. Thereafter the same is copied into the hard disc and supplied to the authors or clients.Practically the assessee is receiving some information on manuscript and converting the same into hard disc for using in the computer.Thus the above activity of the assessee neither amounts to manufacturing nor amounts to producing an article or thing - against assessee. Disallowance of foreign travel expenses - Held that:- No details were filed with regard to the foreign travel to show that the expenses were incurred wholly and exclusively for the purpose of the business and accordingly the ground raised by the assessee dismissed - against assessee.

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• Customs

• 2012 (10) TMI 463
  Licencing of Custom House Agent - old regulation v/s new regulation - Held that:- Those who had cleared the examinations under the regulations issued in the year, 1984, would be eligible for the grant of licence, subject to their fulfilling the other conditions of eligibility, as the actions already taken under the earlier regulations issued in the year, 1984, had been saved by the new regulations issued in the year 2004. Therefore, the petitioner is eligible for the grant of Customs House Agents Licence, as he had passed the written, as well as the oral examination under Regulation 9 of the Customs House Agents Licensing Regulations, 1984 held prior to the coming into force of the new regulations in the year, 2004 - direction to the department to issue the necessary certificate granting the Customs House Agents Licence to the petitioner - against department.

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• 2012 (10) TMI 462
  Confiscation of goods - heavy melting steel scrap – Held that:- Once the classification is accepted and goods are held to be used pipes, it is quite clear that they are not covered by para 2.17 of Import Trade Policy which allows free import of goods since this paragraph does not cover goods under CTH 7304. Since the goods are old and used, restriction applicable on second hand goods would apply - appellant requires license and therefore goods are liable to confiscation – confiscation upheld Mis-declaration – Held that:- Claim of the appellants that they had given the full description of the goods is correct – Held that:- It is a question of interpretation as to whether used and old pipes can be considered as heavy melting scrap or not and appellant has gone by the description in the invoice and the party from whom they have imported goods to give the description in the bill of entry. Therefore the charge of mis-declaration cannot be sustained – penalty reduced

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• 2012 (10) TMI 461
  Stay application - Computer networking equipments were imported by the respondent and assessment was sought on the basis of the unit price declared by them – Held that:- Lower appellate authority has, in fact, allowed deduction to the extent of over 97% on HP listed prices, for which no rhyme or reason is forthcoming - appellate Commissioner's order should be stayed till final disposal of this appeal

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• 2012 (10) TMI 445
  Writ petition - Confiscation and penalty – alternative remedy – Held that:- Writ petition cannot be directly entertained ignoring the statutory remedy of appeal, that was available to the petitioner - petitioner did not avail the remedy of getting the reference made to this Court under Section 130A of the Act. Petitioner has also not challenged the order passed by learned Additional District Judge - Petitioner has thus by his own action/inaction, while not questioning correctness of the confiscation order as also the order passed by the learned Additional District Judge, accepted those orders as valid, which orders have even otherwise became final. In these facts, petitioner cannot be held to be entitled to the relief prayed for

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• 2012 (10) TMI 425
  Mis-declaration in exporting the non-Basmati Rice - reredemption fine and penalties - Held that:- There is clear and unambiguous admission to the misdescription of the goods. It was not case of classification or any dispute with regard to description, which was required to be sent for the final reference to DGFT, or to some other laboratories. The Tribunal proceeded on the basis that there was no dispute to the nature and quality of goods, which was not non-basmati rice. If the petitioner had any grievance with regard to non-consideration of matter on merits, the point should have been taken in the Tribunal itself. Having failed to do so, the appellant cannot be allowed to canvass the point in the High Court in an appeal under Section 130 of the Act. The redemption fine has been imposed at 10% of the penalty under Section 114 (5) on the ground that the goods were not exported and that containers did not go out of India & the penalty under Section 114 (i) have been imposed reasonably at Rs.6,90,000/-, which is 5% of the amount of penalty awarded by order in original - Thus the redemption fine and penalties were not levied only on confession & the customs authorities relied on test reports, which were not denied nor any objections were filed - against assessee.

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• 2012 (10) TMI 424
  Maintainability of Writ petition – writ challenging the Show Cause Notice - Held that:- Customs Officer assigned with specific functions of assessment and re-assessment in jurisdictional area where goods imported alone are competent to issue Show Cause Notice under Section 28 of the Customs Act, 1962 as ‘proper officer’ and Collector of Customs (Preventive) had not been assigned such functions. Therefore it is submitted that the impugned order is issued by a Preventive Officer and hence the said Show Cause Notice is itself void abinitio - Court is not inclined to impugned the Show Cause Notice especially when the Respondents are seized of the matter and the Petitioner has also given its own inputs in coming to the proper conclusion which has been permitted by the earlier Division Bench of this Court - writ petition dismissed

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• 2012 (10) TMI 423
  100% Export-Oriented Unit - manufacture of ready-made garments – alleged that 100% EOU had cleared without payment of duty certain goods and had been diverted into the domestic market in violation of the provisions of the Customs Act, 1962 – Held that:- Apart from the statement given by the employees who are also held guilty of liability to make payment of penalty there is no other material whatever to connect the company M/s. MNS Exports Private Limited and its Managing Director - disputed transaction has been carried out by collusion with three employees of the respondent-company and Sri Bhaskar who was an employee in the Customs Department and Sri Vikram Jain - in the criminal case no allegation was made against the respondent, it clearly shows that there was no nexus between M/s. MNS Exports Private Limited or its Managing Director - appeal is dismissed

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• 2012 (10) TMI 422
  Duty drawback – alleged that appellants had declared the export goods to be Handicrafts/Artware of the constituent materials and accordingly claimed drawback separately on the constituent materials treating the goods as composite articles - appellants placed reliance on Circular No. 56/99-Cus., dated 26-8-1999 and produced the certificates issued by Metal Handicraft Service Centre and a few invoices stamped by the Export promotion Council for Handicrafts and based their claim for drawback on the fact that all the goods exported were handicrafts – Held that:- Since in this case neither any approval was taken from Commissioner of Central Excise/Customs nor discussions were held with certificate issuing authority, the decision taken by adjudicating/appellate authority to reject the respective handicraft certificate is liable to be set aside - matter back to original authority for de novo proceedings

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• Corporate Laws

• 2012 (10) TMI 460
  Scheme of Amalgamation - contravention of the Provisions of Section 295 of the Companies Act, 1956, as the Company has given loans & advances to M/s Prayaga Constructions (India) Pvt. Ltd., a private limited Company in which directors are interested in terms of Provisions of Section 295 of the Companies Act, 1956 - Held that:- Mr. Ashwani Kapoor, Director of the Petitioner Transferee Company filed his affidavit that all the Transferor Companies and the Transferee Company are group Companies and are controlled by same set of shareholders and Directors. Also the Transferee Company has given inter corporate loans to the Transferor Company No. 2 and the said loans were given on good faith. The alleged violation of Section 295 of the Companies Act, by the Transferee and Transferor Company no. 2 was unintentional and without any malafide. Further the said inter corporate loans have not caused any loss to any of the shareholders, Government or others. Moreover the said inter corporate loans have already been repaid in full by the Transferor Company No. 2 to the Transferee Company. However the Transferor Company no. 2 & Transferee Company along with its Directors, have already filed an Application to the Ld. Company Law Board, New Delhi Bench, New Delhi through Registrar of Companies, NCT of Delhi & Haryana U/s 621A of the Companies Act, 1956 for compounding of the alleged offence vide Form 61 through SRN B57238628 dated 10th September 2012. In view of the submissions made at the bar and the settled law on the subject, the objection raised by the Regional Director is rejected and the Scheme is sanctioned subject to and without prejudice to the liability, if any, in the civil and criminal proceedings in respect of past transactions. It is further clarified that the proceedings pending before the ACMM, Tis Hazari, Delhi against the transferor company and/or its Board, Directors and management etc. shall continue and the liability, if any, of the Board, Directors, Management etc., in the said proceedings would continue as if the Scheme has not been made. Thus sanction is hereby granted to the Scheme of Amalgamation under sections 391 and 394 of the Companies Act, 1956.

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• 2012 (10) TMI 459
  Suit for mortgaged property – Applicability of scope of section 8 of the Arbitration and Conciliation Act – Held that:- There is no impediment for the parties to mortgage suits being referred to arbitration under section 8 of the Act - mortgage suit is not only about determination of the existence of the mortgage or determination of the amount due. It is about enforcement of the mortgage with reference to an immovable property and adjudicating upon the rights and obligations of several classes of persons who have the right to participate in the proceedings relating to the enforcement of the mortgage, vis-a-vis the mortgagor and mortgagee. Even if some of the issues or questions in a mortgage suit are arbitrable or could be decided by a private forum, the issues in a mortgage suit cannot be divided - suit being one for enforcement of a mortgage by sale, it should be tried by the court and not by an arbitral tribunal - appeal is accordingly dismissed

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• 2012 (10) TMI 421
  Oppression and mismanagement - scope of proceedings under Sections 397 and 398 - Held that:- As the first respondent herein had admitted in her first affidavit before the CLB that she had signed the memorandum of settlement of September 17, 2011 & there is nothing in the second affidavit by way of even a line of explanation as to what compelled the first respondent to admit her signature and her execution of the memorandum of settlement of September 17, 2011 or the changed circumstances under which she wished to retract therefrom. Upon the admitted execution of the share transfer forms and the handing over of the share certificates, and the subsequent registration of the transfer thereof, the respondents herein ceased to be shareholders of the company on the transfer being effected and could no longer pursue the proceedings under Section 397 and Section 398 whether on merits or for the oblique purpose of extracting further money for the sale of the shares or even for obtaining their rightful due therefor - the CLB ought to have focussed on the primary issue before it as to the permissibility of the continuation of the petition and not traversed beyond jurisdiction to ensure that the petitioners before it got their rightful due. The CLB should have appreciated that the petition under Sections 397 and 398 could no longer be prosecuted and ought to have left the petitioners before it free to canvass their grievance as to the inadequacy of the consideration before the appropriate forum. If the share certificates have been deposited by the appellants or their nominees with the CLB pursuant to the direction contained in the order impugned, they shall be immediately returned to the named holders thereof. If the sum of Rs.12,03,47,715 has been deposited by the respondents with the CLB, the respondents will be entitled to refund of the same immediately together with any accrued interest thereon.

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• Service Tax

• 2012 (10) TMI 492
  Non fulfillment of conditions of Notification No.32/2004-ST dated 03.12.2004 and Notification No.1/2006-ST dated 01.03.2006 - declaration required to be filed by the respective GTA as prescribed has not been complied with - Held that:- In absence of any particular format prescribed under the respective notifications, the department insisting for declaration on each consignment note for allowing the abatement under the said Notifications is un-sustainable in law. In these circumstances the declarations filed by the goods transport agencies (GTA) in their letter-heads or in the respective payment bills certifying that they have not availed CENVAT Credit on inputs or capital goods nor availed the benefit of exemption Notification 12/2003-ST dated 20.06.2003 should have been accepted by the department in extending the benefit of Notification No.32/2003-ST and 1/2006-ST - in favour of assessee.

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• 2012 (10) TMI 491
  Business Support Service - appellants are international cricket players - petition for waiver of pre deposit - Held that:- As decided in M/s KPH DREAM CRICKET (P) LTD Versus CCE, CHANDIGARH [2012 (7) TMI 504 - CESTAT, NEW DELHI] the service tax was demanded from the franchisees in respect of fee paid to foreign players by invoking reverse charge mechanism for recovering the service tax since the players involved were foreigners. Also the appellants had been required to deposit 10% of the service tax demanded as pre-deposit. As entire amount cannot be and may not be considered as available for promotional events and also considering the fact that whether extended period can be invoked in these cases or not has to be considered in detail, it is appropriate that appellants deposit about 20% of the liability within the normal period quantifying the same as Rs.7.5 Lakh and Rs.3.5 lakh respectively for the the appellant cricketers - against assessee.

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• 2012 (10) TMI 490
  Penalty imposed under Section 76 and Section 78 – non-payment of service tax - appellant paid the full amount of service tax with interest before issue of show cause notice – Held that:- In the absence of any finding by both the lower authorities that service tax had been collected from all the customers, it cannot be said that there was deliberate intention to collect service tax and not to pay the same to the government.. Payment was made as soon as investigation was taken up, would show that this was a fit case for invocation of provisions of Section 73(3) of Finance Act, 1994 which provides that if service tax with interest is paid before issue of show cause notice, no further proceedings should be initiated – penalty set aside

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• 2012 (10) TMI 489
  Franchise Service - appellants are engaged in providing Commercial Training and Coaching Services – alleged that appellant had paid an amount towards royalty to their USA based Franchiser for the use of logo and study materials - held that:- It is evident from the records and the internet details that the appellant termed as Master distributor in the agreement is marketing the Bullet proof manager course as the only franchisee in India for M/s. Crest Com International Ltd. USA and that he is paying royalty to the foreign company for marketing the course. Thus, I hold that the appellant is engaged in franchise service and he is liable to pay Service tax on the Royalty charges paid to the foreign company under “Franchise Service”. Payment of service tax - Held that:- it is evident that the appellant had collected service tax while charging the above fees from their distributors but they had not produced any evidence whether the collected service tax was paid to the Department - onus is on the appellant to substantiate their contention that the royalty paid by them to the Foreign service provider had already suffered Service tax and the same had been paid to the Department. In the absence of any documentary evidence it cannot be said that he had paid service tax to the department on the fees collected which includes royalty charges, which is shared by the appellant and the foreign company as per their agreement – demand upheld

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• 2012 (10) TMI 449
  Credit of service tax on the services provided by a security agency - Held that:- Proposal to give an opportunity to the appellant to submit a detailed worksheet to the adjudicating authority so that he can submit a verification report to prove or disprove the claim of the appellant that they have fully discharged taxes payable. This report will be taken into account at the time of final disposal of this appeal before the Tribunal. Interest on delayed payment - Held that:- The appellants produced on record a compilation record including the document which are required to be verified at the original adjudicating authority level. The appeal is being remanded, the issue of payment of interest would also be re-decided by the adjudicating authority.

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• 2012 (10) TMI 448
  Goods transport agency (GTA) services - payment of service tax by using cenvat credit - Held that:- As decided in Nahar Industrial Enterprises Ltd case [2010 (5) TMI 608 - PUNJAB AND HARYANA HIGH COURT] a perusal of para 2.4.2 of CBEC’s Excise Manual of Supplementary Instructions shows that there is no legal bar to the utilization of Cenvat credit for the purpose of payment of service tax on the GTA services. Also as per Rule 3(4)(e) of the Cenvat Credit Rules, 2004 the Cenvat credit may be utilized for payment of service tax on any output service - in favour of assessee.

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• 2012 (10) TMI 447
  Penalty – separate accounts – alleged that appellants availed cenvat credit in respect of even those services which were not covered by the provisions of Rule 6(5) providing for cenvat credit even when separate accounts are not maintained – Held that:- When the omission was pointed out, the appellants promptly reversed the cenvat credit - appellant is a public sector unit and having regard to the size of the company and the operations of the company and also the circumstances, availment of wrong credit has happened because of accounting error and is a mistake - provisions of Section 80 are invocable in this case - penalty imposed on the appellant is set aside

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• 2012 (10) TMI 446
  Demand of service tax under transport of goods other than water through pipeline - manufacture and supply of Ready Mix Concrete – Held that:- Common meaning of pipeline would clearly mean a permanent long distance installation of pipes, which connect two terminal points and movement of gas or oil are metered at locations - appellants are not engaged in transportation of goods by pipe line or conduit. Nor they are engaged in making available pipelines as a mode of transport for people, who want to move goods through pipeline - activity of pumping ready-mix concrete at construction sites do not attract service tax under the category ‘transport of goods other than water through pipeline’

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• Central Excise

• 2012 (10) TMI 458
  Direction for pre deposit - Held that:- As the petitioner seeks only reconsideration of the matter at the hands of the Tribunal the points highlighted by the petitioner requires consideration. The finding in Ext.P9, that in the earlier stages there was no direction to make a pre-deposit is also not correct. The duty now fixed has come down to Rs.14,99,801/- from Rs.51,82,048.50, according to the learned counsel for the petitioner. The petitioner will be free to re-agitate the matter before the Tribunal. For enabling the Tribunal to pass fresh order, Exhibit P9 is set aside.

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• 2012 (10) TMI 457
  Delay of 726 days in filing appeal - Held that:- The plea for condoning the delay is that the appellant is a sick company and the appellant-Company was lying closed when the impugned order was received. Only one male Director was looking after the affairs of the company who due to heavy losses and involvement in various cases, could not file the appeal within time. The company is likely to revive now. On these premises, condonation of delay has been prayed. The narration of cause for claiming condonation of delay in filing the appeal would not fall within the expression “sufficient cause” so as to entitle the assessee for condonation of inordinate delay of 726 days in filing the appeal - against assessee.

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• 2012 (10) TMI 456
  Denial of benefit of Notification No. 75/84-C.E. - respondents are found to have brought into their factory Benzene and Toluene on payment of duty at concessional rate in terms of Notification No. 75/84, and the same were, admittedly, used in the manufacture of thinners, which were cleared without payment of duty - once thinners were removed from L-6 premises intended use of the same are in manufacture of paints, varnishes, lacquers etc., and no end use verification is necessary. Therefore, condition of the exemption notification has been fulfilled in this case - demands are not sustainable

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• 2012 (10) TMI 455
  Condonation of delay of 525 days - assessee submits that this delay was inadvertent. It is the submission that the issue involved is the same as was in respect of the very assessee, which is being contested by the assessee in Appeal No. E/922/09 and this Bench had granted unconditional stay – Held that:- Delayed filing of appeal against the impugned order, has been in negligent and needs no sympathy - since negligence is on the part of the assessee the assessee must bear the cost of Rs. 5000/- which should be paid to the Commissioner of Central Excise - Subject to the cost being deposited, delay condoned.

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• 2012 (10) TMI 454
  SSI exemption - extended period on limitation – clubbing of clearance – Dummy unit - Held that:- case against them has not been proved by the authorities with requisite evidence - clubbing of two units cannot be made on the premise that the assessee sold/cleared their entire production to other units - mere fact of management, control or grant of interest free loan is not sufficient to hold the units as a dummy unit in the absence of any money flow back and/or profit sharing and total control on another unit - Allegation of wilful mis-statement and suppression of facts justifying the extended period of limitation for making the duty demand cannot be sustained

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• 2012 (10) TMI 453
  Rejection of Rebate claim – alleged that applicant had exported the goods in March 2008, they had debited the duty involved in August 2008 and had thereby, not complied with the provisions of Notification No. 19/04 dated 6-9-2004 issued under Rule 18 of the rules read with condition (i) of part-I, Chapter 8 of the C.B.E.C. Manual of Supplementary Instructions – Held that:- Provision for claim of rebate is governed by Rule 18, which requires payment of duty at the time of export - provisions contained in Rule 8 does not absolve the assessee from substantial conditions of payment of duty of claim of rebate of duty under Rule 18 of Central Excise Rules, 2002 - rebate of duty is not admissible

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• 2012 (10) TMI 452
  Demand of Cenvat credit in respect of Special Additional Duty of Customs debited in Target Plus/DEPB Scheme - manufacture of Safety Razor Blades – Held that:- Duty debited through DEPB, DFCE, Target Plus etc. schemes would be eligible for Cenvat benefit or drawback facility by the licensed holder and full credit of the 4% Special CVD will be allowed to manufacturers of excisable goods and further clarified that 4% CVD duty debited in DEPB, EFCE, Target Plus etc. certificates may be allowed to be taken back at draw back (brand rate) – demand set aside

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• 2012 (10) TMI 451
  Cenvat credit – intermediate product - manufacture of ethyl alcohol – Held that:- Question of duty liability of the intermediate product arises only when the finished goods are exempted - When the appellant is in the manufacture of dutiable as well as non excisable goods, question of looking into the intermediate product does not arise in the determination as to the final product - requirement of pre deposit waived

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• 2012 (10) TMI 420
  Eligibility of documents for taking credit under the MODVAT SCHEME - gate passes issued prior to 1.4.1994 but endorsed after that date - Held that:- Under Section 35 (H) (1) (iv) r.w.r. 11 of Chapter 27 of Allahabad High Court Rules, the application should be disposed of after the Appellate Tribunal is required to draw up the statement of the case, and refer the question to the High Court, within 120 days after receipt of such direction. As in this case, the question was called on 4.1.2002. The Central Excise Reference Application should have been disposed of by now and it appears that by an error, the matter was directed to be listed after four weeks. Application is accordingly disposed of & If the Tribunal has not yet drawn up the statement of the case, and not referred the question, the same may be done without any further delay.

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• 2012 (10) TMI 419
  Modvat credit denied - dealer only issuing invoices to the appellants without actually supplying the goods manufactured by them - Held that:- Remand the matter to the original adjudicating authority, by accepting their stand that the credit cannot be disallowed in respect of all the transactions especially when the manufacturer as also dealer have deposed in their submissions that it is only sometimes that they were issuing invoices without actual supply of goods - in favour of assessee by way of remand.

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• 2012 (10) TMI 418
  Demand of duty and penalty - clandestine removal of goods – alleged that M/s. New Era Metals was created artificially to camouflage illicit clearances - M/s. New Era Metals was engaged in trading activities. They have procured aluminum profiles from seven other trading units – Held that:- Trading units have paid sales tax on the transaction involved and the sales tax assessment by the authorities is also finalized - There is no concrete evidence on record to show manufacture of the goods by the appellant in that case and its clearance through a trading firm - in the absence of any evidence of excess consumption of raw material or of electricity to support the allegation of excess production and their removal, the demand cannot be upheld on the basis of clandestine removal - in the absence of any tangible and sufficient evidences the demand is not sustainable. It is well settled law that such documentary evidences are required to be given preference over the oral statements.

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• 2012 (10) TMI 417
  Disallowance of cenvat credit – CENVAT credit in question had been availed on MS Flats and MS Angles - alleged that the above items could not be treated as parts, components or accessories of any “capital goods” defined under Rule 2(a) of the CENVAT Credit Rules – Held that:- Officer inspect the said equipments to ascertain whether the flats and angles could be considered as capital goods or Inputs - respondent filed a declaration as to how flats and angles were used and also filed certain photographs in support of such declaration. If this submission is factually true, it shall be open to the original authority to consider such materials also in de novo proceedings - appeal is allowed by way of remand

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• 2012 (10) TMI 416
  Recovery of dues - stay application pending before tribunal - Held that:- CESTAT is required to dispose of the applications for interim relief expeditiously and preferably within a period of three months from the date of receipt of a copy of this order. - Revenue shall not take coercive steps against the petitioner till the disposal of the interlocutory applications of the petitioner for recovery of the amount liable to be deposited by the petitioner

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• 2012 (10) TMI 415
  Cenvat Credit - retrospective amendment or prospective amendment - The question was as to whether the Appellant had failed to reverse an amount equivalent to ten percent of the value of the goods from the Cenvat Credit account in relation to goods cleared to SEZ Developers. - Held that:- Tribunal in its impugned order has observed that prima facie the amendment by the notification dated 31 December 2008 could not be retrospective since it was not clarificatory. However, tribunal in Sujana Metal Products Pvt. Ltd. - (2011 (9) TMI 724 - CESTAT, BANGALORE) has taken the view therein that the amendment by the notification dated 31 December 2008 is clarificatory and hence retrospective in nature. Matter remanded to Tribunal for fresh consideration

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• 2012 (10) TMI 414
  Rebate claims – export – alleged that adjudicating authority has erred in sanctioning rebate amount in cash without ascertaining the correct value under Section 4 of the Central Excise Act, 1944 and without deducting from FOB value of all post removal expenses incurred factory gate onwards – whether in case of export, the place of removal is not factory gate but the place where the delivery of the consignment is given to the buyer and property in the form of goods is passed on to the buyer – Held that:- Place of removal may be factory/warehouse, a depot, premise of a consignment agent or any other place of removal from where the excisable goods are to be sold for delivery at place of removal - department has not determined the place of removal as per the statutory provision - it is essential to first determine the place of removal and then decide as to what shall be the assessable value under Section 4 - original authority directed to determine the place of removal taking into account the above observation and decide the rebate claims accordingly

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• 2012 (10) TMI 413
  Restoration of appeal – delay in filing appeal - non-compliance with the requirement of pre-deposit – Held that:- Only 50% of the amount required to be deposited has been deposited and restoration application has been filed after 4½ years. Because of the inordinate delay in filing the restoration application, the arguments regarding merits of the case cannot be considered without considering the plea of ld. SDR about delay in filing the application - application filed with such a delay for restoration of appeal, cannot be considered

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• CST, VAT & Sales Tax

• 2012 (10) TMI 493
  Sale occasions import - Taxation on Air conditioning equipments - @20% OR @10% - Period of limitation for revision of the order - reasonable period - Held that:- In the absence of limitation period for revision under Section 21 of the Tripura Sales Tax Act, 1976, it would be very difficult to come to a conclusion that in the given case the revisional jurisdiction invoked by the Revisional Authority under Section 21 of the said Act after a period of three years would be one exercised with malafide intention or the Revisional Authority should not exercise its revisional jurisdiction after the lapse of three years from the date of passing the order against which revision lies under Section 21 of the Act. Three years period cannot be said to be a very long period and therefore, in all these cases, we hold that the power was exercised within a reasonable period of time. As the petitioner strenuously contends that the point in the paragraph 6(v) of the impugned order dated 26.03.2012 was decided wrongly, the Revisional Authority is directed to take into consideration of the decisions of the Apex Court in State of Maharashtra v. Embee Corporation [1997 (8) TMI 443 - SUPREME COURT OF INDIA] while interpreting the expression "sale occasions import" occurring in sub-section (2) of section 5 of the Act, it is not necessary that a completed sale should precede the import. Revisional Authority is directed to dispose of the Revision Case by passing a reasoned order within a period of two months.

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• 2012 (10) TMI 450
  Ujala Supreme - taxable @ 4% OR 12.5% - whether the product is substantially the same as its original material AVP or has it undergone a manufacturing process to transform itself into a commercially distinct identifiable end product - Held that:- The product “Ujala Supreme” though is a highly diluted form of Acid Violate Paste (AVP), as has been rightly held by the learned Single Judge, it retains the essential characteristics of AVP. Therefore, it cannot be said to be commercially distinct and different from the user product AVP, which is covered by Entry 114 of schedule II-C to the Act. Thus referring to Hon’ble Supreme Court in the well known case of UNION OF INDIA Versus DELHI CLOTH AND GENERAL MILLS CO. LTD.(1962 (10) TMI 1 - SUPREME COURT OF INDIA) that manufacture signifies bringing into existence a new substance and not merely to effect a change in one. Therefore, no justifiable reason to accept the submission of the appellant State that the product emerges out of a manufacturing process and to place the product in the residuary category in the fifth schedule to the Act. Therefore no different from the one taken by the learned Single Judge can be taken - in favour of assessee.

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• Indian Laws

• 2012 (10) TMI 488
  Penalty - Delay in deposit of Foreign Travel Tax - Applicant was required to collect from all passengers embarking on an international journey a Foreign Travel Tax Foreign Travel Tax is required to be deposited in Government Account/Treasury in accordance with the Foreign Travel Tax Rules, 1979/FTT (Amendment) Rules, 2003 – whether it was not open for the adjudicating authority to enhance the quantum of penalty while considering the Show Cause Notice after its remand by the appellate authority to the adjudicating authority – Held that:- the applicant had deliberately contravened the provisions of sub-section (3) of Section 38 of Finance Act, 1979 (FTT). For these contraventions, the applicant is now circumventing the basic truths and for these contraventions the department has very rightly imposed the minimum penalty as mandatorily prescribed in this Section itself. No dispute that there had been delay - in mandatorily depositing of the impugned foreign travel tax amounts collected during the relevant three months, there is also no dispute regarding liability/responsibility of the applicant for depositing the same and therefore in contravention thereof the applicant was liable to pay all the legally imposable penalties for such delays - If one goes through the order of remand, one would find that it was not a limited remand - remand was to enable the adjudicating authority to consider all the issues after affording opportunity of personal hearing to the petitioner - Show Cause Notices were restored to the file of the adjudicating authority for consideration afresh. It was not a limited remand - it was open for the adjudicating authority to enhance the amount of penalty in consonance with the provision of sub-section (3) of section 38 of the Act.

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• 2012 (10) TMI 410
  Non issuing tickets to the passengers inspite of collecting the fare - punishment of removal from service to the guilty workman - Industrial Adjudicator deleted order of removal of the respondent workman from service - Held that:- The Industrial Adjudicator in the order dated 17th December, 2009 has given as many as three reasons for holding the departmental inquiry to be bad i.e. of the passengers during the inquiry having not supported the case of the checking staff, cash having not been checked by the checking staff and the appellant having not appointed the Presenting Officer. Merely, because sufficient opportunity of hearing had been given to the respondent workman alone is not sufficient for upholding the departmental inquiry. The Supreme Court in Indian Iron & Steel Co. Ltd. v. Their Workmen AIR [1957 (10) TMI 21 - SUPREME COURT] has held that though the management of a concern has power to direct its own internal administration and discipline but the power is not unlimited and when a dispute arises, the Industrial Adjudicator has the power to see whether the termination of service of a workman is justified. It was further held that though in cases of dismissal on misconduct the Industrial Adjudicator is not to act as a court of appeal and substitute its own judgment for that of the management but the Industrial Adjudicator will interfere when there is want of good faith OR when there is victimization or unfair labour practice OR when the management has been guilty of a basic error or violation of a principle of natural justice and when on the material on record the finding is completely baseless or perverse. Thus each of the three reasons given by the Industrial Adjudicator for holding the inquiry to be bad was sufficient for setting aside the same.

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